28th Sep 2023 14:36
(Alliance News) - Investors on Thursday were worried about rising oil prices, which may mean that interest rates will have to stay higher for longer amid a global battle against inflation.
"Another leg up in oil prices has added to the market worries about sticky inflation, thereby stoking fears that interest rates will stay higher for longer," said Russ Mould, investment director at AJ Bell.
"The market is worried that supplies of oil are going to be tight and if prices keep going, it is going to cause a real headache for businesses and consumers."
Oil prices have risen 30% since June after some of the world's biggest producers, including Saudi Arabia and Russia, announced a series of supply cuts to last until the end of this year.
Brent oil was quoted at USD93.68 a barrel at midday in London on Thursday, down from USD95.52 at the London equities close on Wednesday.
The rise has fuelled concerns over persistent inflation adding to the narrative that interest rates will have to stay higher, for longer. It has also created an unstable mood for investors.
Higher for longer fears resurfaced last week after the US Federal Reserve left its benchmark interest rate at a 22-year high but signalled it still expects one more hike before the end of the year and fewer cuts than previously indicated next year.
Fed Chair Jerome Powell, speaking at a press conference following the decision, pledged to keep rates restrictive until confident inflation was moving down to 2%, saying there was a "long way to go".
"Crude oil has played a significant role in the global inflation challenge as initial concerns about oil supply disruptions caused by the Russia-Ukraine conflict sent prices soaring, later pulling back. However, high global demand and OPEC+ production cuts are pushing prices back towards USD100 per barrel, indicating that the fight against inflation is ongoing as the commodity has a noticeable impact on overall price pressure," explained Walid Koudmani, chief market analyst at XTB.
In London, BP and Shell were among some of the top blue-chip stocks on Thursday afternoon, up 0.4% and 0.5%, respectively, benefiting from the elevated Brent price.
By Sophie Rose, Alliance News reporter
Comments and questions to [email protected]
Copyright 2023 Alliance News Ltd. All Rights Reserved.
Related Shares:
ShellBP